Ecuador

So far, so good

Lucio Gutiérrez finds friends abroad but doubters at home

FOR a left-leaning former army officer and coup-leader, Lucio Gutiérrez went down surprisingly well in Washington. Barely three weeks after becoming Ecuador's president, he was having an hour-long meeting with President George Bush and pledging, in his opposition to drug-trafficking and terrorism, to be America's “best friend”. He was also snaring an IMF deal that will release $500m in multilateral loans. He has done so by making solemn promises that he will use Ecuador's oil revenues to pay off the country's debts. But his eagerness to clinch IMF support may cost him dearly at home.

Faced with a probable debt default and a budget gap for this year estimated at $2 billion, or 8% of GDP, Mr Gutiérrez has adopted some decidedly centre-right measures. Within a week of taking office he increased the price of petrol by a third, froze public-sector wages for a year and talked of introducing new taxes. Days later he announced a gradual rise in electricity tariffs, increasing the average bill by more than 10% over the next six months. His budget for 2003 promises a fiscal surplus for this year of around $250m. Almost the only signs that he is still left-wing at heart are the fact that he has cut his own salary by 20% and started jogging to work.

But his economic plan carries big political risks. The IMF is demanding tax modernisation and a big reduction in public-sector jobs. It also wants international administrators for the state electricity and telecoms companies, and a cut in the subsidy on domestic cooking gas.

Though the president's popularity seems solid enough, he has had to walk on eggshells to preserve his coalition with Ecuador's Andean Indian farmers. They feel betrayed by the price increases and disappointed at the government's $6.7 billion budget, which devotes more than a third of this year's revenue to debt-reduction and only a quarter to social spending. The Indian political party, Pachakútik, seems sulkily persuaded that Mr Gutiérrez will concentrate on their needs eventually; the Conaie, the biggest of the Indian movements, has given him 30 days to “mend his ways”. If he does what they want, such as reversing the fuel-price increases and sacking his economic team, the IMF will not like that much.

The president must also convince Congress to vote for economic reform. It comes in the shape of three bills. The majority opposition alliance may back a law to crack down on corruption in the customs service, but it is unlikely to support the tax and civil-service-reform bills that will go to Congress later in the year.

Mr Gutiérrez's critics are also worried by the military cast of his government. Several important posts have gone to former army colleagues, including the presidencies of the state telephone companies, the state oil company and a number of ministries. Mr Gutiérrez, who has already forced out 17 generals, is now proposing a 40.5% increase in military expenditure, creating speculation that he is tightening his grip on the army. Troops have been turning up alongside the police to fight crime, and at the ports to control the customs authorities. There has even been talk of putting the police under the control of the defence ministry as a fourth branch of the armed forces. Mr Gutiérrez's family has been favoured, too, with relatives and in-laws taking jobs in the government.

The challenges facing the president are serious, and he may not overcome them. But his visit to Washington suggests a clever strategy: that by getting America and the international financial community on his side, he becomes a much harder man for Congress to oppose.